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Rosatom is a strategic, vertically integrated and fully state-owned company, which manages the assets of the Russian nuclear industry at all stages of the nuclear fuel cycle. Rosatom is present in all segments of the civil nuclear market: from mining uranium deposits in Russia and abroad to producing nuclear fuel commodities through conversion and enrichment, and building reactors and power plants, often with bespoke technological solutions. The company coordinates the work of a large network of engineering, infrastructure and construction companies as well as research institutes and technology parks.

The president appoints Rosatom’s director general – in 2016, Putin appointed First Deputy Minister of Economic Development Alexei Likhachev to replace Sergei Kiriyenko, who was appointed First Deputy Chief of Staff of the Presidential Administration – and members of its supervisory board.

The company’s business strategy is developed based on the goals set by the state for the civilian branch of the Russian nuclear industry and approved by the government. One of Rosatom’s key goals in the current strategy is to increase its international market share and establish itself among the top three world leaders in every segment of the global nuclear market by 2030.

Indeed, since its creation in 2007 from the Russian Atomic Energy Ministry, the company has set itself on this path, consolidating its positions as a leading international player for nuclear technologies and generating substantial overseas revenue from nuclear power plant (NPP) construction, nuclear fuel fabrication and uranium enrichment.

As part of the industry reform, the company has benefitted from the “vertical integration”, which has enhanced Russia’s competitiveness in the global nuclear market by improving coordination in the activities of over 350 enterprises and organisations that comprise Rosatom, cutting costs and creating economies of scale. At the same time, the company’s close affiliation with the Russian state has offered distinct advantages that have propelled Rosatom’s global expansion.

Access to state funding has been a critical asset underpinning many of Rosatom’s projects and driving its rapid international growth. Estimates suggest that Rosatom underbids its Western competitors by between 20% and 50%, in large part thanks to government subsidies.

Consequently, it has successfully secured over 60% of recent global reactor sales and 67% of the world NPP construction market (in signed contracts and intergovernmental agreements).

The financial backing from the state has allowed Rosatom to offer large long-term loans to customers who under regular circumstances would not have been able to afford the high costs of NPP construction.

Not all has been plain sailing for Rosatom in its ambitious bid for rapid expansion. In South Africa, for instance, its plans were dealt a blow in 2017 after the High Court ruled to cancel a 2014 intergovernmental agreement to build eight nuclear reactors in the country. The agreement was deemed “unconstitutional and unlawful”; and in mid-2018, despite openings from Putin in a meeting with President Cyril Ramaphosa, South Africa proceeded to cancel all plans to add nuclear power by 2030. Nuclear power has been ruled out as too expensive and the government under Ramaphosa is now opting to generate additional electricity from natural gas, wind and other energy sources. Rosatom responded quickly to such setbacks and the changing political environment, signing in January 2018 a hydro scheme in Mpumalanga, in what became its first energy contract in South Africa.

By the end of 2017, Rosatom’s 10-year portfolio of overseas orders amounted to $133.6 billion – more than the order books of all its Western competitors combined. The company expected to sign foreign contracts worth another $26 billion in 2018. In its global activities, Rosatom is focusing heavily on NPP construction: of the $133.6 billion portfolio of overseas orders, $97.6 billion are for power plant construction. Indeed, Rosatom has emerged as the undisputed market leader by the number of simultaneously implemented nuclear reactor construction projects: it is currently building (or has under contract) six reactors in Russia and 36 abroad.

At the same time, Rosatom’s reputation has been a constraining factor to its growth in Europe. Seen as an arm of the Kremlin, the company is often assumed to be acting at the behest of the Kremlin, seeking to advance Russia’s political goals notwithstanding economic costs. Despite this widespread perception, an analysis of Rosatom’s expansion pattern shows that the company remains attuned to the customer’s ability to repay loans with interest.

In cases where the aspiring state is unable to pay for the NPP, the parties tend to come up with alternative arrangements. For instance, in Jordan, the initial agreement with Rosatom for a $10 billion nuclear power plant signed in 2015 was replaced in May 2018 with a plan to construct a Small Modular Reactor for which a joint feasibility study is being conducted. In other instances, projects have been postponed, cancelled or downscaled.

Rosatom’s build-operate-own business model has attracted harsh criticism from the West spurred by the fears that it would give Russia access to critical energy infrastructure on the territory of another state. In this model, Russia finances the construction of NPP and trains personnel to operate the facilities. The criticism has nevertheless not precluded Turkey from adopting the model at the $20 billion Akkuyu NPP, which is currently under construction. At Akkuyu, Rosatom has not sought to retain a 100% ownership of the plant and was actively negotiating with a Turkish consortium the sale of a 49% stake. The talks collapsed in February 2018 after the parties reportedly failed to agree commercial terms. The assurances of Russian Energy Minister Alexander Novak that Rosatom would complete the project alone if necessary were taken by critics as yet another “proof” of the politically motivated nature of this build. However, among the economic factors that played a role in the decision to proceed with the construction were Rosatom’s $3 billion investment undertaken prior to the collapse of the talks and its ability to recoup the costs through the guaranteed long-term electricity price.

Modern NPPs have a planned operating life span of 60 years with potential extensions of up to 40 years. This means that Russia will supply goods and services to the foreign NPPs that it builds not only during their construction but throughout their lifespan. Once the plant is built, switching to another fuel supplier is possible but is usually associated with additional costs and can cause difficulties during transition.

The plant’s probable lifelong dependency on the external fuel supplier is yet another reason that motivates Rosatom to build NPPs abroad. Operating and supplying fuel to NPPs forms part of Rosatom’s economic assessment when planning new builds because the provision of these goods and services generates long-term revenue, allowing projects to go ahead which otherwise would have been deemed unprofitable.

Yet, unsurprisingly, reliance on Russian supplies has led to fears in Brussels and Washington that Moscow could use nuclear fuel supply to its reactors in Eastern Europe to assert its political influence. Five EU member- states – Bulgaria, the Czech Republic, Hungary, Slovakia and Finland – operate Russian VVER reactors on their territory.VVERs are pressurised water reactors, which use light water as a coolant and moderator. There are four VVER-1000 and 14 VVER-440 type units in the EU. All receive fuel supplies exclusively from Rosatom’s subsidiary, TVEL. In the context of deteriorating Russian-Western relations, the EU sponsored a project aimed at diversifying nuclear fuel sources for Russian-designed reactors.

The Western sanctions imposed on Russia over the annexation of Crimea in 2014 do not apply to the nuclear industry and Rosatom’s operations have not been directly affected. Nevertheless, an EU project known as the European Supply of Safe Nuclear Fuel has indirectly sought to limit Rosatom’s presence over the medium and long term. The project, sponsored under the aegis of Euratom’s Research and Training Programme (2014-18), was conducted by Rosatom’s competitor, Westinghouse Electric Company, and its eight European partners. Its successful completion was announced in March 2018 when the consortium stated that it had developed “a conceptual fuel design and determined how the manufacturing and supply chain can be re-established to build and ship VVER-400 fuel assemblies”. The political atmosphere that has prevailed since 2014 will constrain Rosatom’s opportunities in Europe, both in supplying nuclear fuel and constructing new reactors.

Bulgaria exemplifies this. In June 2018, Sofia lifted the ban on the construction of the country’s second power plant in Belene and announced its intention to hold a new international tender. Local media reports identified Rosatom and China National Nuclear Corporation as the most likely contenders to bid for the project, with Framatome and General Electric interested only as subcontractors. However, awarding the contract to Rosatom, no matter how economically attractive, would be politically controversial. The government cancelled this very project in 2012, bowing to pressure from Washington and Brussels, which insisted on reducing Russia’s role in the country’s energy sector. Rosatom took the case to the international arbitration court and won, forcing Bulgaria to pay $620 million in compensation.

Nonetheless, Rosatom’s involvement in Europe in the post-2014 environment should not be ruled out a priori. Hungary’s agreement with Rosatom to expand its Soviet-era nuclear power station at Paks got the green light from the EU in March 2017, three years after the initial deal had been agreed between Prime Minister Viktor Orban and President Putin. Budapest successfully used the “technical exclusivity” argument, claiming that an open tender was unnecessary because only Rosatom could meet the project’s specific technical requirements. Under the agreement, Rosatom will build two new reactors at Paks, and 80% of this €12.5 billion project will be financed with a Russian loan.

Despite the growing difficulties of working in Europe, Rosatom will persevere in its attempts to compete in Western markets. Reputational gains from supplying Western customers – and meeting stringent safety requirements – are not to be underestimated at a time when the company is actively marketing its expertise to the countries of Asia and the Middle East. In 2016, Rosatom made much of its success signing a commercial contract for the supply of fuel to Swedish operator Vattenfall. Credentials earned in the West give Rosatom advantages in an increasingly direct competition with Chinese and South Korean nuclear technology providers in the NPP construction and operation segments of the market. Enhancing its competitiveness in Asia is important as demand for NPP construction comes primarily from that region due to its rapidly growing electricity demand, both actual and projected.

Rosatom shares and promotes the Kremlin’s objective of turning nuclear power into Russia’s major export industry. Growing exports of Russian nuclear technologies bring a sizable high-tech element into the country’s overall export structure.Modernising the Russian economy and increasing the value-added of its exports is in line with the Kremlin’s stated interests. The export of nuclear technologies and associated services provides the country with a new source of tax income, which is less prone to boom-and-bust price cycles than hydrocarbons.

Indeed, the contribution that Rosatom makes to the state budget has grown considerably since 2014. Rosatom emerged as Russia’s eight largest taxpayer in 2016 (after five oil and gas companies, Sberbank and Russian Railways) and remained in the top 10 the following year with tax payments to the budgets of various levels amounting to 148.5 billion roubles. The fact that foreign projects made up almost a half in revenue and tax means that state support for Rosatom has broader economic objectives.

Rosatom’s foreign investments also enhance Russia’s political influence but in ways significantly subtler than Kremlin critics suggest. For instance, in Turkey, Russia is working with the government to draft regulations for the nuclear industry, which will apply to its own Akkuyu plant. This creates the risk of regulatory capture. Government-to-government loans and large-scale strategic projects, such as Akkuyu and TurkStream, the pipeline to transport Russian gas to Europe via Turkey, elevate inter-state relations to a fundamentally new level. They also make involvement in other strategic projects significantly easier. Rosatom’s sprawling presence in Asia and the Middle East promotes Moscow’s preferred self-image as a great power with enormous scientific know-howand ability to attract newcomers to the civil nuclear market as part of its wider effort to build a new international order.